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Court Upholds Canadian Law's Power Over Foreign Takeovers

Government Is Obliged to Enforce Canada Investment Act, USW Says

TORONTO, June 14 /CNW/ - A court ruling released today confirms the federal government's ability and obligation to ensure foreign takeovers of Canadian companies provide real benefits to the country, the United Steelworkers (USW) union says.

"This ruling is a victory for our members and all Canadians," said Ken Neumann, USW National Director for Canada.

"The court has confirmed the Investment Canada Act is constitutional and it is now up to our government to enforce this legislation with all foreign takeovers, to the fullest extent," Neumann said.

Today's ruling by Madam Justice Dolores M. Hansen in Ottawa dismisses a legal challenge by U.S. Steel, which had argued the Investment Canada Act's enforcement mechanisms were unconstitutional.

U.S. Steel launched its legal challenge last year, after the Canadian government took the Pittsburgh-based steelmaker to court on the grounds it broke commitments it made about maintaining jobs and production levels at the former Stelco operations in Canada.

In order to gain Canadian government approval to buy Stelco, U.S. Steel made numerous commitments to ensure its purchase would provide a "net benefit" to Canada, as required by the Act.

Instead, U.S. Steel shut down former Stelco operations and laid off hundreds of workers, members of the USW. Following months of protests and pressure from the Steelworkers and other groups, the federal government took legal action against U.S. Steel, alleging the American company broke its commitments.

The case against US Steel marks the first time the federal government has taken such action, despite the damaging impacts of numerous other foreign takeovers. These include Brazil-based Vale's purchase of Inco Ltd. and Swiss-Anglo miner Xstrata PLC buying the former Falconbridge Ltd. Both cases have resulted in job loss and economic devastation for Canadian communities.

In her ruling, Justice Hansen declared that the undertakings made by foreign corporations in such takeovers "are binding commitments" made to the Canadian government.

"This ruling also should compel Canada's government to finally stand up for Canadians and enforce the law in all cases where foreign takeovers do not provide the mandatory 'net benefit' to working families and communities," Neumann said.